MGT 550: Introduction to Project Management

MGT 550 Introduction to Project Management

(Continuation of Lecture 1)

Chapter 2: Project Initiation

Wesley J. Howe School of Technology Management

Course Development Team Members: Michael Poli Celia Desmond, PMP David Keeney, PMP, CQM, CPDT
March 31, 2002 For academic use only. 1

MGT 550: Introduction to Project Management

Copyright Information
The slides in this file are provided to faculty instructing MGT 500 on behalf of the Stevens Institute of Technology. Use is restricted to academic endeavors associated with the delivery of MGT 550 to students properly enrolled at the Stevens Institute of Technology. All other rights are reserved by the original owners of materials contained in this program. The slides contain copyrighted material that has been reproduced and/or adapted to the course syllabus under the doctrine of fair use for academic purposes. All slides in this course are copyrighted by the original source. Requests to reproduce materials for other purposes should be directed to the copyright owner identified in the bibliography that will be made available to faculty.

March 31, 2002

For academic use only.

MGT 550: Introduction to Project Management

Module 2: Project Initiation

Purpose: prepare students to understand and apply project initiation concepts in the areas of project selection, risk assessment, data gathering and analysis, and proposal development.
March 31, 2002 For academic use only. 3

MGT 550: Introduction to Project Management

Module 2 Objectives
Data Gathering and Analysis
Assess the value of data contained in the information base used during the initiation of a project. Consider the basic characteristics for the types of measurements commonly used as project selection criteria.

March 31, 2002

For academic use only.

MGT 550: Introduction to Project Management

Project Charter
Formally recognizes the existence of a project.
Project Charter Business need

It authorizes the Product description project manager to apply organizational resources Constraints to project activities.
Assumptions A signed contract may serve as a project charter for the seller.
PMBOK p 54-55 5

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For academic use only.

MGT 550: Introduction to Project Management

Project Targets
Dimensions of Project Success Performance
Specs

Project efficiency Impact on Customer Business impact on organization Opening new future opportunities

Target: Customer Satisfaction Cost Time

March 31, 2002

Due Date

Budget Limit

For academic use only.

M&M Text, p 4

MGT 550: Introduction to Project Management

Measurement Time: End vs. Beyond End

Initial Phase Risk
Cumulative Cost & Staffing

Intermediate Phase

Final Phase

Risk Start Time

Cost & Staffing

Value Finish

The success measurement may yield different results at different points of time: During the project At the end of the project Far beyond the end of the project
March 31, 2002 For academic use only.

PMBOK, p 13

MGT 550: Introduction to Project Management

Measurement Subject: Project Success

Project is not product:
Project is successful but product fails

Project is not subproject:

Subproject is successful but project fails

Project is not operating phase:

Project is successful but operations fail
March 31, 2002 For academic use only.

M&M Text, p 3-4

MGT 550: Introduction to Project Management

Risk Quantification
Evaluating risks and risk interactions Assess range of possible outcomes Determine which risk events warrant response Complications: Opportunities and threats interaction Single risk cause multiple effects Opportunity for one, threat to another False impression of precision and reliability
March 31, 2002 For academic use only.

PMBOK, p 137

MGT 550: Introduction to Project Management

Qualitatively Describing the Risks

High

High
Med
PROBABILITY OF OCCURRENCE

Medium Low
Low
IMPACT

Low Medium
Desmond, 2001

High
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March 31, 2002

For academic use only.

MGT 550: Introduction to Project Management

Sample Decision Tree

Ye s

Pay
A 6 s is 0%

F dF Penalty
w No % 30

Yes

30%

Pay

75 + F dF

No 70 %

Pay 75 + F dF

F dF

Use 1

Make changes 30%

Don t Us

Use 2

Later 70%

Pay

e1

0%

Pay

F dF

Buy NoRefund Ticket

90%

Pay

No

Y es

Use 3

Key:
No 1 0%

F = Full Fare d = Discount % dF = d * F

Pay

$0

Penalty Node = 22.5 + F dF Use 2 Node = 59.25 + F dF Use 1 Node = 17.98 + F dF Use 3 Node = .9F When .9F = 17.78 + F dF I am indifferent about which ticket to buy. 0 = 17.78 + .1F dF indicates that a NoRefund ticket should be purchased when the equation < 0.

Note: Since airfares and discounts vary greatly, any useful decision tree must be able to compare the expected penalty to the discount and expected fare.

March 31, 2002

For academic use only.

Keeney, 2000

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MGT 550: Introduction to Project Management

Economic Analysis
Considers such information as:
Cost estimates Stream of revenue Operating costs Present values Taxes Tax effort of deprecation - Time estimates - Time value of $ - Cost of capital - Net cash flow

March 31, 2002

For academic use only.

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MGT 550: Introduction to Project Management

Project Stakeholders and Success

Project Team Project Manager Customer

Sponsor

Public

Performing Organization
March 31, 2002 For academic use only. PMBOK p 16 13

MGT 550: Introduction to Project Management

Attitudes Towards Risk

Favor Risk
Range of choices expands High risk acceptable, desirable Opportunistic strategies with higher payoffs Offensive, innovation, strengths, potential

Risk Averse
Range of choices limited Risky alternatives eliminated Past strategy exerts more influence Safe, conservative, reasonable, highly probable Defensive, minimize weaknesses, threats, uncertainty

Highly Volatile Industries Absorb greater risk Consider broader, diverse strategies
March 31, 2002 For academic use only.

Industry Evolution Early market Greater risk

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MGT 550: Introduction to Project Management

Module 2 Objectives
Proposal Development
Understand the basic solicitation documents (RFI, RFQ, and RFP) and the role they play in project bid/proposal development. Discuss the importance of selection criteria when making procurement decisions that will initiate a project/subproject.

March 31, 2002

For academic use only.

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MGT 550: Introduction to Project Management

Procurement Processes
Procurement Solicitation Planning Planning Bidders List Solicitation Source Contract Contract Selection Administration Closeout Bid Analysis

Issue
IFB RFI RFQ RFP
or

Receive
Bids Brochures Quotations Proposals

Negotiation and Selection

Contract Execution

Contract Closeout

Requisition
March 31, 2002

Time
For academic use only.

Keeney, 2001

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MGT 550: Introduction to Project Management

Reading Assignments
From Chapter 2
Text
Pp 25 34 Pp 39 73

For Chapter 3
Text
Pp 85 - 128 Pp 134 - 137

March 31, 2002

For academic use only.

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